Allocation and Apportionment of Overheads

Allocation 

Allocation is the process of charging the full amount of overhead costs to a particular cost centre.ie salary of the sales manager is allocated to the sales department.

ICMA,London defines Allocation as "the allotment of whole amount of cost to cost centres or cost unit.

Apportionment

Apportionment of overhead is the process of distributing those items of overhead (which cannot be allocated to a cost centres or department),between cost centres and departments on an equitable basis.

It is the process of splitting up an item of overhead cost and charging it to the cost centres on an equitable basis.

ICMA,London defines Apportionment as "the allotment of proportion of cost to cost centre or cost units. 

Overhead - Meaning

Overhead Meaning 

Every form of proudction involves two type of costs i.e direct cost and indirect cost.Direct costs can conveniently be indentified with particular unit of production,i.e direct material, direct labour,direct expenses. Indirect cost cannot be traced to any unit of production. The word indirect indicates that the cost accountant is either unable or unwilling to allocate cost to a particular cost unit,but it is generally apportioned to or absorbed by cost unit or cost centres on suitable basis.

ICMA defines overhead as 'total cost of indirect material,indirect wages and indirect expenses' 

Blocker and Weltmer define "Overhead costs are operating costs of a business enterprise, which cannot be traced directly to a particular unit of output